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Healthy order book, strong balance sheet and the potential to unlock value from real estate projects make Unity Infraprojects a decent investment idea on a medium-term basis. Mumbai-based Unity Infraprojects is a small-sized construction firm operating in buildings, water and roads segments. The company is also developing real estate on its land parcels in Nagpur, Bangalore, Pune, Kolkata and Goa. The total saleable area from these projects is nearly nine million square feet.

Unity Infraprojects stands to gain by unlocking the value in its real estate projects. It was not able to monetise any of its real estate projects due to delays in execution by over a year. However, it is now in an advanced stage of securing approvals for launching its Bangalore residential project. Unity has a total saleable area of nearly 3 million square feet in this project, which it intends to launch in another three months.

After this it will focus on monetising its real estate in other cities. The current order book of the company in its construction business stands at Rs 4,700 crore, which are 2.75 times its FY11 revenues. These orders are to be executed over the next three years. The company has been increasing its exposure to the roads segment in the last few years. Although the roads segment is highly competitive, Unity’s backward integration in terms of owns machinery has allowed the company to garner better operating margins than its peers.

In the nine months ending December 2011, the company has maintained an operating margin of 15.5%. Another factor that augurs well for the company is its strong balance sheet. As of September 2011, the company had a debt-equity ratio of 1.1, which is one of the best among its peers. Unity Infraprojects’ stock is trading at a P/E of 3.9 while similar-sized rivals like Pratibha Industries and Supreme Infrastructure India are trading at a P/E of 5.9 and 5.2, respectively. Considering its growth potential and the relative discount to its peers, the stock looks attractive at this level.

From April 15, the state government’s affordable housing policy is set to be implemented. With a preliminary notification already out, the policy will be implemented after the final notification in a month’s time.

This decision took place at a recent meeting between Additional Chief Secretary (Urban Development Department) TC Benjamin and representatives of Confederation of Real Estate Developers’ Associations of India (CREDAI) from Pune, Nagpur, Kolhapur, Nashik and Aurangabad.

The government in the notification has made it mandatory for all projects on more than 2,000 sq m land to reserve 20 per cent of the land or constructed space for small-sized housing.

Benjamin said that, “The state has a dearth of such housing and this initiative will help bring about more such houses in residential projects. It will have to be implemented by the builders after April.”

Builders expressed reservations about whether the 20 per cent of the land should be reserved in the same area. However, it was decided that they could have a little farther but in the same zone. To this Benjamin added that, “They have to provide the housing with almost the same kind of infrastructure.”

However, most of the builders had reservations about having the economical housing on the same campus but agreed to have it a little farther away from their projects.

Pune CREDAI representative Satish Magar, who attended the meeting, said, “We are open to the policy but had some issues, which we discussed.”

NEW DELHI: Growing demand for homes in smaller cities of the country is attracting real estate biggies. Cities like Bhopal, Bhubaneswar, Coimbatore, Indore, Jaipur, Lucknow , Nagpur, Surat , Vadodara and Visakhapatnam are estimated to add 354 million sq ft of residential development in the coming 03 years. According to a research, large builders like DLF , Unitech , Parsvnath , Omaxe , Ansals and Emaar MGF have already diversified into these cities. These cities today show huge potential for growth. These cities are attracting the big developers because of their considerable price stability and growth prospects. With economic activity picking up in these cities, there is a growing migration from smaller areas, which has created a shift towards an apartment culture. This shift will foster volumes for larger developers in the future.

Looking at this new demand, banks and financial institutions are also looking towards these cities to bridge the financial saturation gap.The growth prospects in the smaller cities are fascinating huge developers with multi-city existance.

NEW DELHI | BANGALORE: Broker in Bangalore bylane has just opened a stationery shop. He has named it ‘Smart Shop’, borrowing the name from the realty brokerage firm that he ran from the same premises until about two months ago. He switched to retail after his property business hit a rough patch following a slump in home sales. About 03-quarters of his revenues came from sale of apartments, the remaining from renting.

“With home sales dropping, it doesn’t make business sense anymore,” he says. It’s the same story in other big cities. In Mumbai, a mid-size broker has set up a small fast food joint to make ends meet. In Nagpur, a real estater has quit the real estate business and set up an ice-cream parlour. Their worries are not unfounded. While the large and established players in the property business have managed to stay, even during the slump, thousands of smaller players like brokers and agents are being forced to look for other jobs.

It also hit lakhs of people employed with such small outfits – each of which hires 5-15 people.With many brokers closing shops or reducing size, these people are out in the market, looking for jobs in sectors such as retail, banking, insurance and call centres. The real estate industry employs about 10 lakh people across the country, the majority in the unorganised sector.

In the first quarter of 2011, home sales dropped 17 per cent in Mumbai, 14 percent in Bangalore and 15 percent in Hyderabad. According to consultant Jones Lang La-Salle, unsold residential units in projects that are complete or are nearing completion in 6-12 months in Mumbai and Delhi-NCR are as high as 25 percent and 16 percent, respectively. In other big cities, including Bangalore, Chennai and Kolkata, the numbers range between 12 percent and 19 percent. Sales in tier-II and tier-III cities are steady, though there is some panic due to the increase in interest rates, which have climbed to about 11 percent from 8.25 percent a year ago.

“For smaller brokers, the impact of the current market factors is a lot more compared to the larger brokers,” says the president of the National Association of Realtors India . “Even for our members – who are fairly well-off – business is down 40 percent compared to 2009-10. But the smaller guys are in trouble and are setting up businesses that move on a daily basis. Many I know have asked their employees to look out” Ravindra Bramhe, chairman of the Maharashtra Property Brokers’ Association, says.

For whatever business is left in the market, there are hundreds of agents in queue. For instance, there are pockets on the Noida Expressway, near large projects, where real estate brokers can be seen sitting inside small tents, under the sweltering sun, waiting for business. Those who can’t afford to set up these tents can be seen on the roadside, running after every car that passes by, with brochures and flyers of projects in hand. Industry refers to them as the broker mandi. “All my friends and colleagues are now looking outside real estate before things get worse,” says Chaudhary. Many have returned to the insurance industry and others have found jobs with small call centres. A few have found employment with retail stores.

LIC Housing Finance focuses to have a all India-presence for its senior citizens homes business as the rise in demand from senior citizens provokes the company to scale-up presence in other cities across the country. The 4th largest mortgage lender has finished two projects, one in Bangalore and the other in Bhubaneswar, They believe this “futuristic idea” will lead to the home finance company eventually spinning off its care home business into a listed body as early as 2014.

“We expect to make the care homes business a fully listed body in coming three to five years,” CEO of LIC Housing finance said. LIC H.F., promoted by the country’s largest insurer, the LIC of India, is looking for an existence in up to 07 cities, which it says are more “friendly to the senior citizens” and also can get land at discounted rates. The company lately finished a 98-unit project and a bigger 200-unit project in Bangalore and Bhubaneswar respectivly.

Presently the organisation is in the process of acquiring land in Jaipur, Haridwar and Goa. “More cities such as Nagpur and Pune which have historically been friendly to the retired people will be looked at.” India has 65 % of its people aged between 15 and 64 years, so the business model might find many takers. Retirement homes are built in a community format with modern amenities including gymnasium & club houses, music rooms and auditoriums. These projects also come with a house-help which is offered by the developers or owners themselves.

NEW DELHI: The Income Tax Department became one of the largest purchasers of real estate properties last year as it embarked on a mega expansion fling to spread its establishment for enhancing taxpayer services in the country.

The department, which has recently started a special drive to check frequency of black money in the country’s real estate sector, has acquired high-worth properties worth about 2,500 crore in more than 20 cities in the last year alone.

The largest possession by the department has been at the cost of more than 2,000 crore for the purchase of office space in the civic centre near the national capital’s marketing hub, Connaught Place. The civic centre is the tallest building in Delhi. The department has likewise purchased 56 staff quarters worth more than 89 crore at the pricey Bandra-Kurla complex in Mumbai.

“All the purchases have been done in order to inflate taxpayer facilities and to provide better living and working facilities for the department staff. No doubt the department’s purchasing power has been the largest in the last financial year.” The department, with these possessions in the real estate sector has probably become the largest government department to acquire and create real estate in the country, the Income Tax commissioner said.

The shopping bucket of the department, has other high-profile acquires and possessions like creation of a training centre and hostel facilities for new comers of the Indian Revenue Service (IRS) at their alma mater – National Academy of Direct
Taxes (NADT) in Nagpur at the cost of Rupees100 crore.

In Chandigarh, the I-T department has purchased 5,000 acres of land for office space at the cost of more than Rupees 33 crore, a centralized air conditioned I-T office at Udaipur at the cost of more than Rupees 16 crore, acquisition of land for creation of office building for the department in Mumbai at about Rupees 23 crore and land measuring more than 9,500 sq m at Jamnagar, Gujarat for office building at Rupees 8 crore.

Another set includes office building at Siliguri for 5.5 crore and a separate creation of 49 residential sectors and guest houses at Siliguri in excess of 10 crore. One more big acquirement by the department has been made at Muzzafarpur in Bihar for building staff quarters at the cost of more than 21 crore.

The department has also been sustained by the success of direct taxes (income tax) collection which was about 4.50 lakh crore in the financial year 2010-11. Despite the department paying 72,000 crore in refunds, the stout direct tax collection is the highest in any financial year.

In last few months Indian real estate has undergone a reawakening enforced by a noticeable increase in the level of construction activity of low-budget housing coupled with low home loan rates reached an all time low in the last few years.

As researched by Boston Analytics, the Indian realty sector has undergone an increased supply and pace of development activity which brought an improvement in pessimism associated with the realty prices. A low interest rate on home loans driven by Government’s impetus packages have also catalysed the Indian consumers to buy homes.

“Increased supply, improvement in pessimism related to realty sector rates, and low rates of interest on home loans seems to be encouraging Indian consumers to firm up their home purchase decisions” as said by Shirin Bagga, Economist, Boston Analytics.

According to the recent reports the conviction concerned to speed of construction activity conveys more anticipation with regards to observed change in construction activity in Tier II and Tier III cities relative to Tier I cities. The real estate projects which are in different phases of completion in all levels of towns and cities appear to be introducing optimism about the expected change in construction activity among respondents across Tiers,” the report said.

As brought into light by Economic Survey of FY 2009-10, the need of the construction and real estate sector in creation of both financial and physical assets has been amplifying over the years. The construction sector now accounts for 8 percent of GDP at constant prices, hiked from 7.7% in 2004-05.Equivalently, the share of real estate ownership of dwelling and business services in overall GDP as hiked to 9.2 percent in FY 2008-09 from 8.9 percent in 2004-05.

Leading interracial supply chain and logistics solutions provider firm Transport Corporation of India Ltd declared this week that its board advisory have approved the consolidation of its real estate & warehousing undertaking into a new company named TCI Developers Limited (TDL).

The company sent a press statement via email saying that the demerged entity would have properties and investments with a book value of Rs 50 crore. The company presently has realty properties in major cities including Delhi, Pune, Chennai, Bangalore, Ahmadabad, Nagpur and many more.

The management conceives that the company’s Real Estate & Warehousing undertaking has the capability to expand the company’s existing real estate into commercial ventures and create a focused entity to develop large scale logistics infrastructure projects like truck terminals,multi-modal logistics parks, free trade warehousing zones and a lot others.

By developing a separate entity like this, the management determines to provide strategic direction and raise adequate funds for its development plans on the strength of its future profitability and growth plans in the Real Estate and warehouse construction sector.

The company’s Executive Director Vineet Agarwal said in the press statement, “Investment in realty & warehousing is more capital intensive and yields return over a longer period of time in comparison to the services model of the logistics business. Going forward, on a long term basis we would look at raising funds from strategic investors and financial institution”.

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